A sense of normality has returned to the equity market despite worries that 3Q18 financial results will cause drag the market again
By DASHVEENJIT KAUR / Pic By BLOOMBERG
After the rout among some of the counters, a mix of volatility after the historic 14th General Election (GE14), dismal corporate results and controversies, the dust seems to have settled and some of the battered stocks are off their lows.
A sense of normality has returned to the equity market despite worries that the October through December 2018 quarter (3Q18) financial results will cause a drag on the market again.
A few counters had been battered last year, closing to new and recent lows which are MyEG Services Bhd, FGV Holdings Bhd, Telekom Malaysia Bhd (TM), Gamuda Bhd and Cahya Mata Sarawak Bhd (CMS).
These five stocks fell more than 30% on the first trading day post-GE14. Some of these stocks continued to falter last year. Here is a look on how these stocks have performed so far this year.
Once an investors’ darling due to its monopoly of government e-services lost 59.69% of its value over the last eight months.
However, the shares reversed its fortune, climbing 11% in the past five days and 15% in the past 30 days.
Yesterday, the stock closed at RM1.05 with a market capitalisation of RM3.79 billion. Analysts consensus for the one-year price target is RM1.83, for a potential return of 75%.
MyEG trades at 15 times its estimated earnings per share for the coming year, while its dividend yield is 1.6% on a trailing 12-month basis and 0.6% based on Bloomberg Dividend Forecasts for the next 12 months. In the past six months, insiders have increased their holdings by 3.1%.
Officers and directors disclosed 5.74 million shares of open market purchases at an average price of 94 sen a share and one million of sales at RM1.30 a share.
Adding to that, the Employees Provident Fund (EPF) has ceased to be a substantial shareholder in MyEG after disposing a portion of its interest in the company.
In an exchange filing last October, EPF disposed of 3.5 million ordinary shares in the company on Oct 24, 2018.
Two research firms upgraded their stance to ‘Buy’ for MyEG for its attractive business model, which reaps healthy profit margins of more than 50%.
MIDF Investment Bank Bhd in its research note said MyEG’s experience in building tax monitoring system, would place the group in a better position to clinch the Sales and Services Tax monitoring project.
“We also favour the group’s strategy of monetising its existing expertise abroad.
“Moreover, an expected dividend yield of approximately 2% further adds as a sweetener to the stock,” it added.
The troubled planter may have witnessed its stock declined by 62% in the past 52 weeks, almost 50% in the last eight months. However, a check on Bloomberg shows that FGV has risen 13% in the last five days and 30% in the past 30 days.
Analyst consensus one-year price target for the company is 94, for a potential return of 14%. Analysts however, did lowered the target by 41% in the past three months.
FGV currently trades at 82 sen a share compared to RM1.61 eight months ago.
For the nine-month financial period ended Sept 30, 2018, FGV reported a net loss of RM871.15 million, compared to a net profit of RM80.49 million a year ago, largely due to impairment losses of RM798 million. FGV also lost RM3.96 billion of its market value in the past year.
Insider holdings amount to less than a 0.1% stake in the company but in the past six months, they have increased their holdings.
Officers and directors disclosed 300,000 shares of open market purchases at an average price of 82 sen a share and no sales.
The telcommunications giant had a rough year last year, the worst since the 2008 global financial crisis.
Its share prices have plummeted by 56.5% year-to-date (YTD), and RM13.6 billion wiped off from its market value. TM was also removed from the FTSE Bursa Malaysia KLCI constituents in the year-end review.
The sell-down was mainly due to the May 22, 2018, announcement by Minister of Communications and Multimedia Gobind Singh Deo that he would work towards improving broadband connections at lower prices.
This led to an agreement by the country’s four key telcommunications company TM, Maxis Bhd, TIME dotCom Bhd and Celcom Axiata Bhd, on the mandatory standard on access pricing, which will result in lower fixed-broadband prices.
Just a day before the May 9 national polls, it was trading at RM5, but as of yesterday, it traded at only RM2.66 a piece, 46.8% lower.
A little respite may be around the corner when TM was seen trading 1.5% higher in the past five days and 1.9% in the last 30 days, but it may still be too vague, analysts said.
TM trades at 18 times its estimated earnings per share (EPS) for the co- ming year and its company dividend yield is 4.5% on a trailing 12-month basis.
The analyst consensus one-year price target for the company is RM2.57, for a potential loss of 3.4%. Analysts also lowered the target by 29% in the past three months.
Being the largest fixed-broadband market player, analysts see TM as the company that will be impacted the most.
There is also concern that the reform could put TM’s monopoly in the fixed-broadband space at risk.
Earlier this year, Tenaga Nasional Bhd announced the launch of its pilot project in Melaka to test the viability of providing broadband services through its fibre-optic network.
Under the pilot project, several Internet providers will offer packages to residents in Jasin, including Astro Malaysia Holdings Bhd, Celcom, City Broadband, DiGi.Com Bhd and Maxis.
At 20 times FY19 estimate price-earnings ratio, a check on Bloomberg shows that TM’s valuation looks pricey, considering the challenging business environment.
That will likely lead to contraction in FY19E core earnings and its heavy balance sheet.
Gamuda and CMS
It is apparent that the construction sector was one of the worst-performing sectors on Bursa Malaysia, with most of the declines occurred post-GE14 as the the new administration cancelled and deferred some of projects.
The Bursa Malaysia Construction Index YTD has fallen more than 50%, leaving companies like Gamuda Bhd and CMS under selling pressure.
Gamuda saw RM6.35 billion wiped off from its market capitalisation, declining 45.88% in eight months to be trading at RM2.76 a share compared to RM5.10 prior to GE14.
The bright side is that the shares have increased 12% in the past five days and 21% in the past 30 days.
Gamuda trades at 11 times its estimated EPS for the coming year and the company’s dividend yield is 4.4% on a trailing 12-month basis.
Analysts consensus one-year price target for the company is RM2.94, for a potential return of 6.9%. As for CMS, while the stock may have not decline as great as the rest, it did depreciated 23% in the past 52 weeks.
Most recently, the shares of CMS have gained 7.4% in the past five days and 10% in the past 30 days.
CMS trades at 13 times its estimated EPS for the coming year and the company’s dividend yield is 2.5% on a trailing 12-month basis.
Analysts consensus one-year price target for the company is RM4.18, for a potential return of 31%. Analysts left the target little changed in the past three months.
Inter-Pacific Research Sdn Bhd opines that badly shaken investors will not revisit the construction sector for a long time to come, at least not within most of the year 2019.
“Unless a fresh global recession unfolds, there may be no pressure on the government to undertake stimulus spending, of which construction spending has invariably formed an important part.
“It appears our previously unconventional views of the construction sector have been finally become a widely held industry view among investors, despite the likely observation that for a few quarters more, jobs already in hand will be sufficient to keep construction sector earnings fairly firm,” it said.